updated 10/7/2004 4:21:13 PM ET 2004-10-07T20:21:13

The head of the U.S. government agency that guarantees pension schemes has warned that it faces a growing threat from the crisis in the US airline industry, and in wider U.S. corporate pension funding.

Bradley Belt, executive director of the Pension Benefit Guaranty Corporation (PBGC), told the Senate commerce committee that while agency could cover its current obligations, the "the longer-term solvency of the pension insurance program ... is at risk."

Mr. Belt cited the liklihood of the agency being required to fund $2.1 billion in pension obligations at United Airlines, owing to the bankrupt carrier's announcement that it would suspend pension fund contributions, and of possible similar action by Delta.

"We estimate that the total exposure of plan participants and the pension insurance program to the airline industry was $31 billion on a termination basis as of the end of 2003," he said in written testimony.

The PBGC's single-employer insurance fund had a record deficit at the end of the 2003 fiscal year of $11.2 billion, and Mr. Belt said he expected to report "a significantly increased deficit for the 2004 fiscal year".

"While developments in the airline industry are cause for concern, they are symptomatic of a broader and deeper set of problems confronting the pension insurance program, plan sponsors, and beneficiaries," Mr. Belt said.

"Simply put, companies should be held accountable to make good on the pension promises they have made to their workers and retirees. The consequences of not honoring these commitments are unacceptable — the retirement security of millions of current and future retirees is put at risk," he added.

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.

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